Transmission Congestion Contacts

Transcription

1 Transmission Congestion Contacts Horace Horton Senior Market Trainer, Market Training, NYISO New York Market Orientation Course (NYMOC) March 20-23, 2018 Rensselaer, NY

2 Transmission Congestion Contracts SESSION OBJECTIVES: attendees will be able to 1) Describe the fundamentals of TCCs 2) Identify the process to obtain TCCs 3) Calculate TCC Congestion Rent and Settlement 4) Compare the two roles of TCCs Hedging against DA congestion costs As a financial instrument 2

3 TCCs Fundamentals. 3

4 1. TCC Fundamentals - Acronyms TCC TUC DAM POI POW ETAs OPF TOs Transmission Congestion Contract Transmission Usage Charge Day-Ahead Market Point of Injection (aka Source) Point of Withdrawal (aka Sink) Existing Transmission Agreements ETCNL-Existing T. Capacity for Native Load, RCRR-Residual Capacity Reservation Rights, GFR-Grandfathered Right Optimal Power Flow Transmission Owners 4

5 TCC Fundamentals Constraints and Congestion Transmission transfer limits create constraints on the optimum economic flow of energy in the power system. Total Transfer Capability = Min(Thermal Limit, Voltage Collapse Limit, Stability Limit) When Transmission limits are reached, generators from different buses are dispatched to meet load. 5

6 TCC - Congestion Example from LBMP Gen Power Up 310 MW Bid $30 Gen Full Steam 350 MW Bid $40 Gen Energy 100 MW Bid $25 Gen Lights On 350 MW Bid $ MW 100 MW 110 MW 150 MW Limit 150 MW Energy $30.00 Losses $0.00 Congestion - $0.00 LBMP $30.00 West Zone Load A 40 MW East Zone Load B 360 MW Energy $30.00 Losses $0.00 Congestion - $5.00 LBMP $35.00 West Zone LBMP = $30 East Zone LBMP = $35 6

7 TCC Fundamentals Previous Concepts Congestion Paid By LBMP/TUC Congestion Paid to/from Generators (LBMP) Primary Holders of TCCs Congestion Revenue TCC Auctions (NET) Purchases/Sales Transmission Owners TSC 7

8 TCC Fundamentals - Defining TCCs A TCC = 1 MW transmission flow between a Point of Injection (POI) and a Point of Withdrawal (POW) Unidirectional! POI one-way flow POW (Source) (Sink) 8

9 TCC Fundamentals - Defining TCCs POI one-way flow POW ($ DAM Source) ($ DAM Sink) 9

10 TCC Fundamentals - Defining TCCs A TCC is a Financial Instrument obtained through a NYISO Auction or other source Energy Market Participation NOT Required to hold a TCC TCC Holders can be any qualified Transmission Customer, including: Power Suppliers Load Serving Entities Transaction Holders Transaction Traders Transmission Owners Financial Institutions Primary Holder of TCC Each Buyer that is awarded a TCC in the Auctions becomes the Primary Holder of that TCC for the effective period 10

11 TCC Fundamentals Defining TCCs; any combination of the below..except Scheduled Line Proxies POI Gen Bus Proxy Bus Zone Reference Bus POW Gen Bus Proxy Bus Zone Reference Bus 11

12 TCC Fundamentals Defining TCCs Identifying PTIDs allowed to be TCC Points 12

13 Let s Review - TCC Fundamentals Identify the statement that best describes a TCC. a) A contract used to cancel transmission congestion costs b) A financial instrument that may be used to hedge against Day Ahead transmission congestion costs c) A financial instrument used to hedge against transmission service charges d) None of the above. 13

14 Let s Review - TCC Fundamentals TCC Congestion Rent Settlements are settled against the DAM and RT Market. a) True b) False. 14

15 Let s Review - TCC Fundamentals In order to participate in the TCC Market, a TCC Holder must also participate in the Energy Market. a) True b) False. 15

16 Obtaining TCC s. 16

17 2. Obtaining TCCs At a glance: TCCs Procured through NYISO TCC Auction(s); either the twice-annual Centralized Auctions or Monthly Reconfiguration Auctions Direct Sale by Transmission Owner Secondary Market, Assignment 17

18 Obtaining TCCs - Auction Process Pre-Auction Activity Market Participant Responsibilities Pass TCC Competency Exam Before NYISO activates bidding rights for MP Self learning training available on line Establish Creditworthiness OATT Attachment W MST Attachment K Post Collateral TCC Manual Section

19 NYISO Home Page

20 Obtaining TCCs - Auction Process Pre-Auction Activity (detail to follow) NYISO Responsibilities Develop TCC Auction Model Optimal Power Flow* Post the Auction Timeline Post # of Rounds, % capacity to be sold per round Verify Scheduled Transmission Outages *The Power Flow representing the transmission system and upon which the NYISO TCC Auction is administered to determine the most efficient simultaneously feasible allocation of TCCs to bidders. 20

21 Obtaining TCCs - Auction Process Pre-Auction Activity- NYISO Responsibilities Post Auction Timeline Posted w/ TCC Manual Attachment D Updates Post Auction Rounds Posted w/tcc Manual Attachment C Updates Verify Scheduled Transmission Outages TCC Manual, Section 4.5.6, see Info & Announcements Post also: Allowable POIs and POWs for this Auction (Att. E TCC Man.) Prohibited Groups of POIs and POWs for this Auction (Att. F) Bidding Rules for the HQ Proxy Bus (Att. G) 21

22 Obtaining TCCs - Auction Process Pre-Auction Activity-NYISO Responsibilities Include TCCs still valid for the auction period as fixed injections and withdrawals - affects capacity available for sale in auctions. Existing Transmission Agreements (ETAs) Impacts amount of capacity available for auction 22

23 Transmission Cable Steel Conductors Aluminum Conductors Transmission Reliability Margin Capacity Benefit Margin Existing Transmission Agreements TCC Sold Previously Auction or Direct 23

24 Obtaining TCCs - Auction Process What are ETAs? Pre-NYISO, wholesale loads like municipal power systems arranged for the delivery of power through Transmission Agreements with the Transmission Providers e.g. the vertically integrated utility companies. These Existing Transmission Agreements or ETAs were preserved when the NYISO came into existence through awards of TCCs over the same paths as the power deliveries that were contemplated in the ETAs. These ETAs are listed in the Tariffs together with the number and path of the TCCs that arose as a result of each ETA. 24

25 Obtaining TCCs - Auction Process Available Capacity Existing Transmission Agreements - where to find them - OATT Att. L 25

26 Obtaining TCCs - Auction Process Pre-Auction Activity Summary Snapshot NYISO Update Transmission Available Capacity For each auction 26

27 27

28 Obtaining TCCs - Auction Process NYISO TCC Auction(s) - Detail to follow Centralized Long Term 2 Year Sub-Auction (or Duration); NYISO optional to hold 1 Year Sub-Auction - NYISO required to hold 6 Month Sub-Auction - NYISO required to hold» Nov - Apr» May Oct 28

29 Obtaining TCCs - Auction Process NYISO TCC Auction(s) - Detail to follow Centralized Long Term Usually multiple rounds per Sub-Auction (Duration)» % of available capacity in each round» Price discovery» Unanimous TO agreement required to hold less than 4 rounds in any Sub-Auction Effective Period All TCCs sold through the Centralized Auction are valid for all hours of each day of the duration of that TCC and will be identified in Att. C 29

30 Obtaining TCCs - Auction Process - Collaborative Process Autumn Centralized Auction Example Eight Auction Rounds The NYISO would offer: 5% of System Capacity as two-year TCCs with one auction round; and 25% of System Capacity as one-year TCCs across four auction rounds; 45% of System Capacity as six-month TCCs across three auction rounds The remaining 25% of System Capacity was sold earlier as oneand two-year TCCs in prior Centralized Auctions 30

31 % System Capacity (S.C.) Offered Sub-Auction (Duration) Round # % Split / Round 5% of S.C. 2-Year Round 1 100% 25% of S.C. 1-Year 45% of S.C. 6-Month 25% of S.C. 100% of System Capacity Centralized Auction Example 3 Months Prior to Capability Period Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8 20% 24% 28% 28% 27% 33% 40% System Capacity already spoken for from prior Centralized Auctions 2-yr & 1-yr TCCs (fixed injections) 31

32 Obtaining TCCs - Auction Process Centralized Auction Round Example S M T W T F S Always refer to posted timeline (TCC Manual Att. D) Offering and Bidding Period Fri 0800 to Mon 1700 NYISO Performs Analysis In 2 days NYISO Posts Awards on TCC Automation site no later than 2100 hrs 32

33 Obtaining TCCs - Auction Process NYISO TCC Auction(s) Reconfiguration Auctions Single Round for a Reconfiguration Auction Opportunity to adjust your position Captures Short Term changes in Capacity Reconfiguration Auctions Two Types Balance-of-Period Auction* Single-Month Reconfiguration Auction *The Balance-of-Period Auction is the current type of reconfiguration auction being conducted 33

34 Obtaining TCCs - Auction Process NYISO TCC Reconfiguration Auctions Balance-of-Period Auction A Balance-of-Period Auction covers the month or combination of months remaining in the Capability Period beginning with the month that follows the month in which the auction is conducted. Two Modes Decoupled Mode Simultaneous single-period solution within a single auction for all remaining months of the Capability Period. Multi-period bids/offers not allowed. Coupled Mode for future implementation Simultaneous multi-period solution within a single auction for all remaining months of the Capability Period. The periods selected need not be contiguous. 34

35 Obtaining TCCs - Auction Process NYISO TCC Reconfiguration Auctions Single-Month Reconfiguration Auction A Single-Month Reconfiguration Auction is conducted in the month preceding the month for which TCCs will be effective. Primary Holders of TCCs that are effective for the entire Auction period may offer those TCCs for sale in the Single-Month Reconfiguration Auction. In addition, Market Participants may submit bids to purchase TCCs in a Single-Month Reconfiguration Auction. 35

36 Obtaining TCCs - Auction Process Reconfiguration Auction Balance-of-Period Example Offering and Bidding Period Fri 0800 to Mon 1700 S M T W T F S NYISO Performs Analysis Always refer to posted timeline (TCC Manual Att. D) NYISO Posts Awards on TCC Automation site no later than 2100 hrs 36

37 Obtaining TCCs - Auction Process Buying & Selling TCCs Offer Parameters to Sell MPs Provide Information per set of TCCs Inventory ID (TCC Contract #) # of TCCs Offered for Sale Minimum Offer Price ($/TCC) Period ID for Balance-of-Period Auction Bid Parameters to Buy MPs Provide Information per set of TCCs POI & POW # of TCCs Desired Maximum Bid Price ($/TCC) Bundle or Unbundle - next slide Period ID for Balance-of-Period Auction 37

38 Obtaining TCCs - Auction Process Bundle vs. Unbundle; the three deltas = the one delta 38

39 Obtaining TCCs - Auction Process Bundle vs. Unbundle Does not change Capacity Value Market Clearing Price Unbundling Option Allows new TCC Holder to Sell Components of Future Auctions Has an impact on credit exposure at time of bidding and after if awarded 39

40 Obtaining TCCs - Auction Process and Clearing Prices TCC Auction Clearing Price Upfront Cost for Obtaining TCCs Established through Auction Clearing Price 40

41 Auction Clearing Price Example TCC Market Clearing Price Total Capacity Available = 200 MW 200 MWs of TCC to be offered for sale Four Rounds with capacity equally divided 50 TCCs/round Available Capacity from Gen A to Zone B = 200 TCCs Two Year Duration Round 1 50 Round 2 50 Round 3 50 Round

42 Auction Clearing Price Example TCC Market Clearing Price Four MPs have requested a total of 60 MWs from Gen A to Zone B Bids are for $ per MW for the duration of the TCC Fill request from the highest price until available TCCs or requests are exhausted 50 MWs/Round Requests for TCCs from Gen A to Zone B Company # MWs Bid Trans IT 20 $5/MW for 2 yrs L&D Power 20 $4/MW for 2 yrs EMC 15 $3/MW for 2 yrs New Power 5 $2/MW for 2 yrs 42

43 Auction Clearing Price Example TCC Market Clearing Price The Clearing Price is the price for the next TCC TCCs can be requested with negative bids Purchaser is paid to accept the TCCs, same MCP rules apply Round 1 awards of TCCs from Gen A to Zone B Company # MWs Requested Bid # MWs Awarded Trans IT 20 $5/MW 20 L&D Power 20 $4/MW 20 EMC 15 $3/MW 10 Paid to NYISO $3/MW x 20 MWs = $60 $3/MW x 20 MWs = $60 $3/MW x 10 MWs = $30 New Power 5 $2/MW 0 MCP 43

44 Auction Clearing Price Example What is Market Clearing Price? 70 MWs/Round Round requests for TCCs form Gen A to Zone B Company Requested Awarded Bid Trans IT $5/MW for 2 yrs L&D Power $4/MW for 2 yrs EMC $3/MW for 2 yrs New Power 6 5 $2/MW for 2 yrs 44

45 Obtaining TCCs - Auction Process Auction Awards 45

46 TCC Auction Process Re-Cap Available Transmission Capacity NYISO Manages Auction TCCs Awarded Awards MCP Established Settlement Process Takes Place $ MPs Provides Bids and Offers 46

47 Let s Review TCC Auction Process Unbundling a TCC allows the Holder to: a) Sell Components of the TCC at Future Auctions b) Adjust the Capacity MWs of the TCC c) Obtain Grandfathered Rights for the TCC d) None of the Above. 47

48 Non-Auction Procurement Methods Alternate TCC Procurement Methods Secondary Market Primary TCC Holder arranges sale w/secondary Party Primary holder can change ownership to Secondary Party NYISO settles w/primary Holder ***See TCC Automated Market System User s Guide*** Direct Sale Transmission Owner can sell (or purchase) TCCs directly, such offers must be posted on NYISO OASIS Historic Fixed Price, Non-Historic Fixed Price, Incremental TCCs ==> 48

49 Non-Auction Procurement Methods Historic Fixed Price TCCs Awarded to LSEs with expiring Grandfathered TCCs or Grandfathered Rights; LSE can choose between a 10 Yr Duration or a 5 Yr Duration with an opportunity to renew for another 5 years at a reset price. 12 yr duration available to LSEs with unexpired NYPA power contracts. Incremental TCCs Awarded at no cost to MPs that increase the transfer capability of the system by constructing new, or improving existing, transmission facilities. Minimum of 20 years Duration. 49

50 Non-Auction Procurement Methods Non-Historic Fixed Price TCCs LSEs with qualifying amounts of average load can purchase NHFPTCCs that sink in their load zone. Original term is 2 Yrs with prices based off 2 Yr TCC auction prices; LSE has opportunity to renew in 1 Yr increments up to a total maximum duration of 10 years. 50

51 TCC Settlement and Congestion Rent. 51

52 3. TCC Settlement and Congestion Rent Auctions-MP settles with NYISO: and subsequently is paid, or pays, the difference between congestion at the sink and congestion at the source, going forward. Settled in (against) Day Ahead Market Only. DAM Congestion Rent is, for each hour (DAM POW less DAM POI) x #TCCs, or: [(-1 x DAM Cong Sink Price$) (-1 x DAM Cong Source Price$)] x #TCCs Source POI Sink POW 52

53 TCC Settlement and Congestion Rent DAM Congestion Rent Example (hourly) LBMP $35/MW LBMP $40/MW Company Power Tower Holds 20 TCCs from A to B Source POI Sink POW $35 LBMP A= Energy $30 Losses $0 Congestion -$5 $40 LBMP B = Energy $30 Losses $0 Congestion -$10 53

54 TCC Settlement and Congestion Rent DAM Congestion Rent Example LBMP $35/MW LBMP $40/MW Source POI [( -1 x -10) (-1 x -5)] x 20 (10 5) x 20 5 x 20 =$100 Holder collects rent Sink POW [(-1 x DAM Cong Sink Price$) (-1 x DAM Cong Source Price$)] x #TCCs 54

55 TCC Settlement and Congestion Rent DAM Congestion Rent Exercise LBMP $20/MW LBMP $27/MW Company Power Tower Holds 10 TCCs from B to A Sink POW Source POI $20 LBMP A= Energy $20 Losses $0 Congestion $0 $27 LBMP B= Energy $20 Losses $0 Congestion -$7 55

56 TCC Settlement and Congestion Rent DAM Congestion Rent Exercise LBMP $20/MW LBMP $27/MW Sink POW [(-1 x DAM Cong Sink Price$) (-1 x DAM Cong Source Price$)] x #TCCs [(-1 x 0) (-1 x- 7)] x 10 (0 7) x 10-7 x 10 = - $70 Holder Pays! Source POI 56

57 TCC Settlement and Congestion Rent TCC DAM Congestion Rent DAM Congestion Rent Settlements Paid/Charged through Consolidated Invoice Process 57

58 Flow versus Counterflow TCCs Flow or positively-priced TCCs In direction of historical prevailing flow Counterflow or negatively-priced TCCs Opposite direction of historical prevailing flow LBMP $20/MW LBMP $35/MW Rent = $5 Rent = $-7 LBMP $40/MW LBMP $27/MW Note that LBMPs do not always reflect direction of flow! 58

59 TCC Settlement and Congestion Rents Example - Positively Priced TCCs TCC Cashflow (CF) + CF +Rent $ +Rent $ +Rent $ +Rent $ +Rent $ +Rent $ +Rent $ +Rent $ +Rent $ +Rent $ Rent $ - CF $ Auction Cost (- CF) To Holder LBMP $35/MW LBMP $40/MW 59

60 Counterflow TCCs - Example + CF $ Auction Payment (+ CF) to Holder +Rent $ +Rent $ 24 - Rent $ - Rent $ - Rent $ - Rent $ - Rent $ - Rent $ - Rent $ - Rent $ - Rent $ - CF LBMP $20/MW LBMP $27/MW 60

61 Congestion Rent Additional Information TCC Market is Fully Funded Over Collection Congestion Revenue Under Collection Transmission Owners 61

62 TCC Settlement and Congestion Rent Congestion Paid By LBMP/TUC Congestion Paid to/from Generators (LBMP) Primary Holders of TCCs Congestion Revenue TCC Auctions (NET) Purchases/Sales Transmission Owners TSC 62

63 Let s Review - TCC Settlement and Congestion Rent DAM Congestion Rent is Always a Credit to the TCC Holder. a) True b) False. 63

64 Let s Review - TCC Settlement and Congestion Rent TCC Holders forego DAM Congestion Rent when not enough Congestion Revenue has been Collected from the Energy Market. a) True b) False. 64

65 TCCs in Action. 65

66 4. TCCs in Action You are awarded Transmission Congestion Contracts (TCCs) in a TCC auction; what are they used for? 1. Using Congestion Rents to hedge against Day- Ahead Market congestion costs (price uncertainty); 2. Recognizing potential for revenue via congestion rents 66

67 TCCs in Action - Hedging Mechanism for LSE Buying Energy- LSE Buys 20 MWh DA Zone G LBMP of $135 $100 is congestion.. to be exactly offset w/ TCC rent credit POI of Ref Bus, POW of Zone G Energy $30.00 x 20 = 600 Losses $5.00 x 20 = 100 Cong. - ( ) x 20 = 2000 LBMP = $ x 20 = $2700 less: TCC Rent Collected -$2000 Net Cost/MWh* = $700 *always read The Fine Print - plus the cost of the TCC Marcy to Zone G TCC LBMP $30 Marcy Source POI Zone G Sink POW [( -1 x -100) (-1 x 0)] x 20 (100 0) x x 20 =$2000 TCC Holder Collects Rent LBMP $135 [(-1 x DAM Cong Sink Price$) (-1 x DAM Cong Source Price$)] x #TCCs 67

68 TCCs in Action - Hedging Mechanism for a Transaction TCCs hedge against Transmission Cong. Costs Offset Congestion Costs, do not cancel Congestion LBMP $35/MW LBMP $40/MW Transmission Usage Charge [(-1 x -10) (-1 x -5)] x 20 x -1 =(10 5) x 20 x -1 = 5 x 20 x -1 = - $100 TUC expense ** ** Assume Losses are $0 TUC expense will be offset by TCC collected rent 68

69 TCCs in Action - the big picture for hedgers $$$$ TCC as a Hedge Cost of Hedge Cost of TCC e.g., Auction Direct Sale Cost of Congestion e.g., related to Transaction TUCs Return on TCCs Via Congestion Rents $ Outflow $ Outflow $ Inflow 69

70 TCCs in Action TCC Purchasers No participation in other markets required. Any entity who meets the credit requirements can be part of the TCC Market. It is not necessary to have an exposure to congestion costs in the DAM to participate. 70

71 TCCs in Action - Investment Profit{ Loss{ $$$$ TCC as a Financial Instrument Cost of TCC e.g., Auction Direct Sale $ Outflow Return on TCCs Rents, Resale $ Inflow.could be a loss! Return on TCCs Rents, Resale $ Inflow 71

72 TCCs in Action - March 2014 Reconfiguration Highest Auction Clearing Price (positively-priced TCC): $12,890/MW (TCC)* Dunwoodie Zone to Sandy Pond (ISONE-NPX) or (Loss) If you bought this $12,889.50, you would have received $8, in Congestion Rents over the month (or 744 DAM hours), for a loss of $4, *sign reversed from posted number 72

73 TCCs in Action - March 2014 Reconfiguration Largest Negative Clearing Price (counterflow TCC): $-22,243/MW (TCC)* Pond (ISONE-NPX) to Zone If you received $22, in the Auction for this counterflow TCC, you would have paid $16, in Congestion Rents over the month, for a gain of $5, *sign reversed from posted number or (Loss) 73

74 Let s Review - TCCs in Action TCCs are a perfect hedge for the cost of congestion on a DAM transaction if both have the same POI and POW and duration. a) True b) False. 74

75 Let s Review - TCCs in Action TCC Auction awardees are guaranteed a profit with respect to the associated Congestion Rents. a) True b) False. 75

76 Transmission Congestion Contracts Summary TCCs Financial, not physical Settled against DAM Only Procuring TCCs Auction Process Alternate Procurement Methods DAM Congestion Rent Settled through invoice process Fully Funded by Transmission Owners Over or Under Collection TCCs in Action Used as a hedging mechanism or financial instrument 76